1. Foundations, Evolution and Philosophy of Strategic Management

Introduction and Context

Strategic management concerns the creation, interpretation, and renewal of an organisation’s direction under conditions of uncertainty. It is not merely the production of a plan or the selection of a competitive position. It involves understanding how organisations relate to their environments, how leaders and other actors make consequential choices, how resources are developed and deployed, and how intended actions become actual patterns of behaviour.

The field is simultaneously practical and theoretical. Practitioners use strategic concepts to decide where to compete, how to create value, which capabilities to develop, and when to abandon established assumptions. Scholars investigate why some organisations outperform others, how strategy is formed, how power and interpretation influence decisions, and why apparently rational plans often produce unexpected outcomes. At doctoral level, strategic management must therefore be approached not as a fixed toolkit but as a field containing competing explanations of organisational action.

The chapter establishes the conceptual foundation for advanced study. It defines strategy and related terms, traces the intellectual evolution of the discipline, distinguishes levels of strategy, explains the strategy process, and critically compares major perspectives: design, planning, positioning, learning, emergent, practice, and complexity approaches.

Learning Objectives

By the end of this chapter, the reader should be able to:

1. Define strategy, strategic management, competitive advantage, strategic intent, and related concepts.

2. Explain the historical development and intellectual foundations of strategic management.

3. Distinguish corporate, business, functional, and operational levels of strategy.

4. Describe the relationship between intended, deliberate, emergent, realised, and unrealised strategy.

5. Compare the design, planning, positioning, learning, emergent, practice, and complexity perspectives.

6. Apply strategic perspectives to organisational and industry situations.

7. Critically evaluate the assumptions, strengths, limitations, and ethical implications of strategic management approaches.

What Is Strategy?

The word strategy derives from the Greek strategos, associated with the exercise of generalship. In organisational settings, however, strategy is broader than a plan for defeating a rival. It refers to a coherent pattern of choices concerning an organisation’s long-term direction, scope, positioning, capabilities, stakeholders, and use of resources.

A strategy answers several connected questions: What purpose does the organisation pursue? Where will it compete? How will it create and capture value? Which activities and capabilities must be developed? What will the organisation deliberately not do? The final question is important because strategy requires choices and trade-offs. An organisation that attempts to serve every customer, enter every market, and pursue every attractive opportunity may possess ambitions but lack strategy.

Strategy is often distinguished from tactics. Strategy concerns the broad direction and logic of action; tactics concern specific moves used within that direction. A firm’s decision to compete through superior service is strategic, while redesigning a call-centre script is tactical. The distinction is relative rather than absolute: a decision that is tactical for a multinational corporation may be strategic for a small business.

Strategic management is the continuing process through which an organisation analyses its context, establishes direction, makes strategic choices, mobilises resources, implements action, evaluates results, and renews its assumptions. It includes both formulation and implementation, although the separation between them is increasingly questioned. Implementation can reveal new information and thereby reshape the strategy itself.

Competitive advantage exists when an organisation creates greater value than competitors or delivers comparable value at lower cost in a way that is not easily replicated. Advantage may arise from resources, capabilities, relationships, brand, technology, business models, speed, institutional legitimacy, or combinations of these. It is not necessarily permanent. Imitation, technological change, regulation, and shifts in customer preferences can erode it.

Strategic intent expresses an organisation’s desired long-term ambition. Mission describes the organisation’s broad purpose and contribution; vision presents an aspiration concerning a desired future state; objectives translate direction into specified outcomes; policies provide general principles for decision-making. These terms are related but should not be treated as interchangeable.

The Intellectual Evolution of the Field

Strategic management developed from several intellectual traditions rather than from a single founding theory. Military strategy contributed ideas about objectives, manoeuvre, intelligence, sequencing, and the relationship between action and environment. Classical economic theory contributed analysis of competition, market structure, and resource allocation. Organisation theory contributed bureaucracy, authority, decision-making, bounded rationality, and organisational structure. Sociology and psychology later highlighted power, identity, interpretation, learning, and institutional pressures.

Early business policy research in the mid-twentieth century focused on the general manager’s responsibility for coordinating the organisation as a whole. The central concern was the fit between internal capabilities and external opportunities. This tradition encouraged systematic analysis but often assumed that senior managers could obtain sufficient information and make relatively coherent choices.

The planning tradition expanded strongly during the 1960s and 1970s. Organisations developed formal planning departments, forecasting systems, budgets, scenarios, and strategic programmes. Planning promised analytical discipline and coordination. However, criticism grew when plans became bureaucratic rituals detached from action, when forecasts proved unreliable, and when responsibility for thinking was separated from responsibility for doing.

The positioning school, associated particularly with industrial-organisation economics, shifted attention toward industry structure and competitive position. Questions concerning entry barriers, substitutes, buyer and supplier power, rivalry, and industry attractiveness became central. This perspective helped managers analyse competition systematically, but its external emphasis could understate internal capabilities, collaboration, institutional context, and the possibility that firms reshape industries.

The resource-based view redirected attention toward internal resources and capabilities. It argued that valuable, rare, difficult-to-imitate, and appropriately organised resources can provide the basis of sustained advantage. Later capability research examined how organisations integrate, build, and reconfigure resources in changing environments. This internal perspective complemented rather than simply replaced industry analysis.

The learning and emergent perspectives challenged the assumption that strategy is always formulated in advance by senior executives. Organisations learn through experimentation, feedback, routines, and adaptation. A realised strategy may emerge from many small decisions rather than from a single master plan. This insight is especially significant where uncertainty is high and knowledge is distributed throughout the organisation.

More recent work has examined strategy as practice. The focus moves from strategy as an abstract noun to strategising as a form of situated activity. Meetings, presentations, analytical tools, narratives, negotiations, and performance reviews are treated as practices through which strategy is produced. Complexity perspectives further challenge linear assumptions by emphasising interaction, nonlinearity, path dependence, emergence, and the limits of prediction.

This evolution does not mean that older perspectives are obsolete. Formal planning may be valuable in capital-intensive industries, positioning analysis may clarify competitive threats, and emergent learning may be essential in innovation. The doctoral task is to identify the assumptions under which each perspective is useful and to recognise what it renders visible or invisible.

Levels and Scope of Strategy

Corporate strategy concerns the overall scope of a diversified organisation. It addresses which businesses or activities the organisation should own, enter, exit, combine, or coordinate. Decisions about diversification, acquisitions, vertical integration, internationalisation, and allocation of capital belong primarily at this level.

Business-level strategy concerns how a particular business competes within a market or industry. It involves choices about customers, value propositions, differentiation, cost, innovation, partnerships, and competitive positioning. A corporation may therefore have several business strategies, each appropriate to a different market.

Functional strategy translates business direction into the requirements of areas such as marketing, operations, finance, human resources, information systems, and research and development. Functional strategies should reinforce one another. A premium service strategy, for example, requires appropriate recruitment, training, technology, service processes, and financial priorities.

Operational strategy concerns the design and improvement of day-to-day activities. Although often viewed as short-term, operational choices can have strategic effects when they accumulate into distinctive capabilities or constrain future options.

These levels are analytically distinct but practically interdependent. A corporate decision to expand internationally cannot succeed without business-level market choices and functional capabilities. Conversely, an operational innovation may reveal an opportunity that changes business or corporate strategy. Strategy therefore flows vertically and laterally rather than only from the top downward.

The Strategy Process: From Intention to Realisation

A conventional strategy process begins with purpose and direction, proceeds through environmental and organisational analysis, generates and evaluates alternatives, selects a course of action, implements it, and monitors results. Analytical tools may include stakeholder analysis, industry analysis, scenario planning, resource and capability assessment, business-model analysis, and financial evaluation.

The process should not be understood as a mechanical sequence. Analysis is shaped by assumptions about what matters, which evidence is credible, and whose interests count. Strategic choice involves judgement because information is incomplete and consequences are uncertain. Implementation involves resource allocation, communication, leadership, structures, incentives, culture, and political negotiation. Evaluation requires more than comparing outcomes with targets; it also requires asking whether the original assumptions remain valid.

Henry Mintzberg’s distinction between intended, deliberate, emergent, realised, and unrealised strategy is particularly useful. Intended strategy represents aspirations or plans. Deliberate strategy is the portion of intended strategy that is actually pursued. Emergent strategy develops through patterns in action that were not fully intended. Realised strategy is the combination of deliberate and emergent elements that becomes observable in practice. Unrealised strategy consists of intentions that are abandoned or never implemented.

This model corrects the common assumption that strategy is identical to a document. It also explains why strategy evaluation should examine behaviour and resource commitments, not merely official statements. A company may claim to prioritise sustainability while investing primarily in activities that increase short-term output; its realised strategy may differ substantially from its declared strategy.

Competing Perspectives on Strategy

The Design Perspective

The design perspective treats strategy formation as a deliberate process of achieving fit between internal strengths and weaknesses and external opportunities and threats. Senior leadership is expected to understand the organisation as a whole, identify a coherent strategic direction, and ensure alignment between structure, resources, and objectives.

Its strength is clarity. The perspective encourages integrated thinking and prevents isolated functional decisions. It is useful when leaders possess substantial knowledge, the environment is reasonably stable, and the organisation needs a clear direction. Its limitations are equally important: it can overestimate managerial rationality, understate political conflict, and portray the environment as more knowable than it is. The familiar SWOT framework can become superficial if it produces lists rather than causal analysis.

The Planning Perspective

The planning perspective emphasises formal procedures, quantified objectives, forecasting, budgets, programmes, timetables, and control systems. It is valuable for coordinating complex organisations, allocating scarce resources, and making assumptions explicit. Scenario planning can also help organisations consider alternative futures rather than relying on a single forecast.

Formal planning becomes dysfunctional when compliance replaces judgement, when numerical precision disguises uncertainty, or when planners are disconnected from customers and operations. Planning should support strategic thinking, not monopolise it.

The Positioning Perspective

The positioning perspective views strategy as selecting a defensible position within an industry or competitive system. Analysis of rivalry, substitutes, new entrants, buyers, suppliers, and competitive groups helps managers understand value capture and structural constraints. Generic approaches such as cost leadership, differentiation, and focus illustrate alternative logics of competition.

The perspective is powerful where industry structure strongly influences profitability and where competitors can be clearly identified. It is less complete where value is co-created with partners, where industries converge, or where firms create new markets. It may also encourage managers to imitate currently successful positions rather than develop unique capabilities.

The Learning Perspective

The learning perspective sees strategy formation as an organisational learning process. Managers learn from experiments, failures, customer responses, operational experience, and unexpected events. Knowledge is distributed, and those closest to a problem may possess information unavailable to senior executives.

Learning does not mean abandoning direction. It requires disciplined experimentation, feedback, reflection, and the capacity to revise assumptions. A danger is that organisations may become excessively reactive, confuse activity with learning, or preserve unsuccessful routines because of escalation of commitment.

The Emergent Perspective

The emergent perspective distinguishes strategy as a pattern from strategy as a prior intention. Strategic direction may emerge from repeated decisions, negotiations, adaptations, and responses to events. This is especially likely in innovative or turbulent settings where detailed prediction is impossible.

Emergence can generate valuable adaptation, but it can also produce drift. Not every pattern is beneficial, and not every improvisation deserves strategic endorsement. Leadership must therefore create boundaries, values, resource priorities, and review mechanisms within which emergence can occur.

The Practice Perspective

The practice perspective examines what strategists actually do. It studies practitioners, practices, and praxis: the people involved in strategising, the socially accepted tools and routines they use, and the situated activities through which decisions are made. Strategy workshops, board meetings, market presentations, dashboards, and informal conversations all become legitimate objects of analysis.

This perspective reveals that strategy is shaped by language, status, expertise, identity, and access to decision forums. It also helps explain why the same analytical tool produces different outcomes in different organisations. A limitation is that close attention to activity may make it difficult to generalise or assess long-term performance unless practice research is connected to broader institutional and economic analysis.

The Complexity Perspective

Complexity perspectives treat organisations as dynamic systems composed of interacting actors and feedback loops. Outcomes may be nonlinear: a small change can have large effects, while major interventions may produce little change. Cause and effect may become visible only after the event. History matters because previous choices shape current options, a condition known as path dependence.

Complexity thinking encourages leaders to work with adaptation, distributed intelligence, experimentation, resilience, and scenario-based sense-making. It challenges the fantasy of complete control but does not imply managerial helplessness. Leaders can influence conditions, relationships, rules, and learning processes even when they cannot determine outcomes. The difficulty is that complexity can be used vaguely; it must be connected to specific mechanisms and evidence.

Applying the Perspectives in Practice

Consider a public hospital facing rising demand, budget pressure, workforce shortages, and digital disruption. A design approach would seek alignment between mission, resources, and service priorities. A planning approach would establish capacity forecasts, investment programmes, and measurable targets. A positioning approach would examine referral networks, competing providers, supplier power, and regulatory constraints. A learning approach would pilot new care pathways and use patient and staff feedback. A practice approach would study how clinicians, administrators, and patients participate in strategic decisions. A complexity approach would examine interactions among demand, professional norms, technology, funding, and patient behaviour.

None of these perspectives alone is sufficient. A robust strategy might combine a clear mission and resource allocation logic with competitive and stakeholder analysis, controlled experimentation, participatory strategising, and continuous adaptation. The appropriate combination depends on uncertainty, time horizon, power distribution, regulation, and the reversibility of decisions.

Illustrative Case: Northstar Mobility

Background

Northstar Mobility is a fictional regional manufacturer of commercial vehicles. It has historically competed through reliable diesel-powered vehicles sold through long-term distributor relationships. New environmental regulation, battery technology, digital fleet platforms, and aggressive international entrants are disrupting its market.

Situation and Problem

The chief executive proposes a five-year plan to become a leading provider of electric fleet solutions. The finance director supports a staged investment programme, while the engineering team argues that battery technology is changing too quickly for a fixed product roadmap. Distributors fear that direct digital sales will weaken their role. Employees are divided between protecting the existing business and developing new capabilities.

Analysis

A design analysis identifies a strong service reputation and engineering knowledge but also limited software capability. A positioning analysis shows intensifying rivalry and increasing buyer power among large fleet operators. A resource-based analysis suggests that distributor relationships and maintenance data may be valuable, but their future value depends on digital integration. A learning analysis indicates that customer willingness to adopt electric vehicles is uncertain and should be tested through pilots. A practice analysis reveals that strategic meetings exclude service technicians who understand fleet problems directly. A complexity analysis highlights feedback between regulation, charging infrastructure, customer adoption, residual values, and supplier investment.

Approach

Northstar adopts a deliberately bounded emergent strategy. It establishes a clear intent—to become a trusted integrated fleet-mobility provider—but does not prescribe one inflexible technology path. It launches pilot projects with selected customers, forms a software partnership, retrains technicians, creates a cross-functional strategy forum, and preserves investment in the profitable legacy business. Quarterly reviews examine customer economics, reliability, regulatory developments, employee capability, and partner performance. The board also establishes ethical principles concerning data ownership, cybersecurity, safety, and truthful environmental claims.

Outcome

In this illustrative case, the pilots reveal that customers value predictive maintenance and route optimisation as much as the vehicle itself. Northstar therefore develops a subscription-based fleet service while gradually electrifying its product range. Some original assumptions are abandoned, but the overall strategic intent is retained. The organisation’s realised strategy emerges from the interaction of deliberate investment and practical learning.

Learning Points

The case demonstrates that strategic management is not a choice between planning and emergence. Clear intent, governance, and resource discipline can coexist with experimentation. It also shows that advantage may depend on combining physical products, data, relationships, and service capabilities. Finally, strategic analysis must include affected stakeholders and ethical consequences rather than focusing solely on market position.

Limitations, Risks, and Common Errors

Strategic management can fail through analytical, behavioural, and ethical weaknesses. Common errors include treating forecasts as facts, confusing objectives with strategy, copying competitors, ignoring implementation, pursuing too many priorities, and measuring only short-term financial outcomes. Managers may also fall victim to confirmation bias, groupthink, escalation of commitment, and status-quo thinking.

Frameworks can create an illusion of completeness. A matrix or score does not eliminate judgement; it represents assumptions that require examination. Another risk is the separation of strategy from power. Decisions about markets, technology, restructuring, and resource allocation distribute benefits and burdens among stakeholders. A strategy may be financially attractive yet socially harmful, legally questionable, or inconsistent with the organisation’s responsibilities.

Governance requires clear accountability, reliable information, challenge from independent perspectives, and monitoring of unintended consequences. Ethical strategy includes truthful communication, respect for affected communities, fair treatment of employees, responsible data use, environmental stewardship, and attention to the long-term legitimacy of the organisation.

Digital technologies and AI can support environmental scanning, scenario analysis, demand forecasting, simulation, and strategic performance monitoring. They do not replace strategic judgement. Data may be incomplete or biased, algorithms may reinforce historical patterns, and automated recommendations can obscure accountability. Senior leaders should ask how data were generated, whose interests are represented, what uncertainties remain, and who is responsible for the decision.

Current Developments and Best Practice

Contemporary strategy increasingly involves ecosystems rather than isolated firms. Platforms, alliances, suppliers, regulators, communities, and users may jointly shape value creation. Resilience has become a strategic concern alongside efficiency, requiring attention to redundancy, adaptability, cyber risk, supply continuity, and institutional relationships. Sustainability is also moving from peripheral reporting toward questions of business-model viability, resource dependence, stakeholder legitimacy, and intergenerational responsibility.

Effective strategic management generally combines several practices: make assumptions explicit; distinguish reversible from irreversible decisions; connect analysis with action; invite diverse knowledge; use experiments where uncertainty is high; align incentives and capabilities; review both outcomes and assumptions; and maintain ethical and governance safeguards. The central discipline is not prediction alone but the development of an organisation capable of sensing, choosing, acting, learning, and renewing itself.

Chapter Summary

Strategy is a coherent pattern of choices concerning direction, scope, positioning, capabilities, and value creation. Strategic management is the continuing process of analysing context, making choices, implementing action, evaluating results, and revising assumptions. The field evolved from military thought, economics, organisation theory, and social sciences into a pluralistic discipline.

Corporate, business, functional, and operational strategies are interdependent. Intended strategy may become deliberate, emergent, realised, or unrealised. The design, planning, positioning, learning, emergent, practice, and complexity perspectives each illuminate different aspects of strategic action. Design stresses fit, planning formal coordination, positioning industry structure, learning adaptation, emergence patterns in action, practice situated activity, and complexity nonlinear interaction.

No single perspective is universally sufficient. Doctoral-level strategic management requires critical comparison, attention to assumptions and power, empirical sensitivity, ethical governance, and the ability to combine deliberate direction with informed adaptation.

Key Terms

Strategy: A coherent pattern of long-term choices concerning direction, scope, positioning, and resource use.

Strategic management: The process of analysing, choosing, implementing, evaluating, and renewing organisational strategy.

Strategic intent: A long-term ambition that guides organisational effort.

Mission: A statement of an organisation’s fundamental purpose.

Vision: An aspiration describing a desired future state.

Objective: A specified result that translates strategic direction into an assessable outcome.

Competitive advantage: The ability to create greater value than rivals or comparable value at lower cost in a difficult-to-imitate manner.

Corporate strategy: Strategy concerning the overall scope and portfolio of an organisation.

Business-level strategy: Strategy concerning how a particular business competes in its market.

Functional strategy: Direction for a specialised organisational function.

Operational strategy: Strategic choices concerning the design and improvement of day-to-day activities.

Intended strategy: Strategy originally articulated or planned by decision-makers.

Emergent strategy: A strategic pattern that develops through action without being fully intended.

Realised strategy: The strategy that becomes evident in actual organisational behaviour.

Positioning: Choosing a competitive place within a market or industry system.

Resource-based view: A perspective explaining advantage through valuable and difficult-to-imitate resources and capabilities.

Strategising: The situated activities through which strategy is produced and interpreted.

Path dependence: The condition in which historical choices constrain present and future options.

Bounded rationality: The limitation of decision-makers’ information, attention, and computational capacity.

Strategic capability: The integrated resources, knowledge, and routines that enable strategic action.

Review Questions

Short Answer Questions

1. Distinguish strategy from tactics using an organisational example.

2. What is the difference between mission, vision, and strategic intent?

3. Explain the four principal levels of strategy.

4. Define emergent strategy and explain how it differs from intended strategy.

5. What does the resource-based view contribute to strategic management?

Long Answer Questions

1. Trace the intellectual evolution of strategic management and explain how different disciplines contributed to it.

2. Critically compare the design and planning perspectives.

3. Explain the positioning perspective and evaluate its limitations in contemporary ecosystems.

4. Discuss how learning, practice, and complexity perspectives challenge linear models of strategy.

5. Explain why strategy formulation and implementation should not be treated as completely separate activities.

Analytical / Application Questions

1. An organisation has a clear five-year plan but repeatedly changes its resource allocations in response to customer feedback. Analyse its strategy using the intended, deliberate, emergent, and realised strategy concepts.

2. Select an industry undergoing technological disruption and evaluate it through positioning, resource-based, learning, and complexity perspectives. Which combination provides the strongest explanation?

3. Design a governance approach for an organisation using AI to support strategic decisions. Identify the data, accountability, ethical, and learning safeguards required.

22. Multiple Choice Questions with Answers

Question 1

Which statement best defines strategic management?

A. The preparation of an annual financial budget

B. The continuing process of analysing, choosing, implementing, evaluating, and renewing strategy

C. The supervision of routine operational tasks

D. The selection of promotional tactics for a product

Correct Answer: B. The continuing process of analysing, choosing, implementing, evaluating, and renewing strategy

Question 2

A firm’s decision to compete through superior service, supported by training and technology, is primarily an example of what?

A. A tactical action only

B. A strategic direction involving coordinated choices

C. An operational variance

D. A short-term forecast

Correct Answer: B. A strategic direction involving coordinated choices

Question 3

Which level of strategy addresses diversification, acquisitions, and the overall business portfolio?

A. Operational strategy

B. Functional strategy

C. Business-level strategy

D. Corporate strategy

Correct Answer: D. Corporate strategy

Question 4

A realised strategy that develops through repeated local decisions rather than an original executive plan is best described as:

A. Emergent strategy

B. Unrealised strategy

C. Mission strategy

D. Deliberate strategy

Correct Answer: A. Emergent strategy

Question 5

The positioning perspective primarily directs managerial attention toward:

A. Industry structure and competitive position

B. Employee personality and individual motivation

C. Internal accounting procedures only

D. The symbolic meaning of organisational uniforms

Correct Answer: A. Industry structure and competitive position

Question 6

Which situation most strongly supports the learning perspective?

A. A stable environment with fully known customer demand

B. A highly uncertain market in which pilot projects can generate useful feedback

C. A routine production process requiring no adaptation

D. A decision that must follow a fixed legal formula

Correct Answer: B. A highly uncertain market in which pilot projects can generate useful feedback

Question 7

The practice perspective studies strategy mainly by examining:

A. Only the profitability of an industry

B. The activities, actors, tools, and routines through which strategising occurs

C. The age of an organisation’s physical assets

D. The mathematical certainty of forecasts

Correct Answer: B. The activities, actors, tools, and routines through which strategising occurs

Question 8

Which claim is most consistent with a complexity perspective?

A. Large interventions always produce proportionally large outcomes

B. Senior managers can fully control organisational outcomes

C. Interactions and feedback can produce nonlinear and difficult-to-predict effects

D. Historical choices have no influence on current options

Correct Answer: C. Interactions and feedback can produce nonlinear and difficult-to-predict effects

Question 9

In the Northstar Mobility case, a bounded emergent strategy means that the organisation:

A. Abandons all long-term direction and reacts randomly

B. Uses clear strategic intent while allowing learning and adaptation within defined boundaries

C. Implements the original five-year plan without review

D. Outsources all strategic decisions to distributors

Correct Answer: B. Uses clear strategic intent while allowing learning and adaptation within defined boundaries

Question 10

Why should AI-supported strategic recommendations not be accepted automatically?

A. AI cannot process any organisational data

B. Strategic decisions never require evidence

C. Data may be biased or incomplete, and accountability can become obscured

D. Technology is unrelated to strategic management

Correct Answer: C. Data may be biased or incomplete, and accountability can become obscured